Russia: Services and Composite PMIs pull up from record lows in May
June 4, 2020
The Russia IHS Markit Services PMI rose to 35.9 in May from an all-time low of 12.2 in April. That said, the index remained well below the critical 50-threshold, hinting at to a sharp deterioration in operating conditions across the Russian services sector.
Whereas May’s result pointed to a much softer contraction in business activity among services providers compared to April, the downturn was still severe and the second-sharpest since 2009, amid the constraining impacts of the heath crisis. Output and new orders dived notably on weak domestic and foreign demand which, in turn, led to evaporating backlogs of work. As a result, firms responded by slashing employment and dropped output prices to attract new clients against the backdrop of lingering pessimistic expectations for the coming year.
Reflecting the trend in the manufacturing and services sectors, the Russia Composite Output Index pulled away from an all-time low of 13.9 in April to 35.0 in May.
Commenting on the result, Sian Jones, an economist at IHS Markit, said:
"Business activity at Russian service providers continued to be stymied by emergency public health measures in response to the COVID-19 pandemic. Customer-facing firms were especially hard hit as some reportedly remained closed […] In contrast to their manufacturing counterparts, services firms reduced their selling prices in an effort to boost new sales. Despite ruble weakness and higher supplier costs due to the pandemic, the rate of input price inflation softened across the private sector, in line with current projections of a further cut to the policy rate as weak demand weighs on upside risks to inflation."
Author: Almanas Stanapedis, Research Team Manager